Insurance companies provide a financial risk transfer mechanism through a contract of insurance. The contract may provide a promise to financially indemnify the insured, up to designated amounts, for covered losses arising out of the agreed upon transferred risks or exposures, subject to the terms and conditions of the contract. To implement their business, insurance companies develop insurance products and coverages that form the basis of the contract between the insurance carrier and the insured. An insurance policy is an individual instantiation of the contract specific to a designated insured, coverage period, and risk transfer comprised of, for example, selected products and coverages and a declarations page identifying individual elements of the insurance policy.
Insurers may face a number of challenges in managing their insurance product development including flexibility, speed to market, and expenses. Flexibility can be a challenge since insurers may want to meet the requirements of a great number and variety of insured, each with different and varied needs. Also, new risk exposures may develop that current insurance products do not address and insurers may desire to respond quickly to their customers' needs for coverage for new exposures, as well as to safeguard their financial exposure. While flexibility may be desired, insurers may want to balance the degree of customization provided to any individual insured with the expense associated with product variability. Accordingly, successfully balancing across these three elements can be a key product development challenge for insurance carriers.
As a highly regulated industry, insurance products must typically be filed and approved by a governing regulatory entity such as, for example, a department of insurance in each state. The filings may include the insurance contract itself and the elements that promulgate the premium charged for any individual instantiation or policy. In order to meet the statutory requirements, the insurance product is traditionally designed as a series of static forms, rates, and rules.
FIG. 1 depicts a system and methodology 100 wherein coverages, based on static forms, are created and filed anew with the appropriate regulatory entity when an existing coverage is extended or otherwise modified from its original static form. As illustrated, when a coverage such as Coverage 1 105 is changed, new versions 110 and 115 must be created and filed. Likewise, when a bundled enhancement coverage such as Stretch 1 120 is subsequently changed, new versions 125 and 130 must be created and also filed. Thus, it is seen that the time, effort, expense, and complexity of system 100 may quickly become untenable, particularly since system 100 relies heavily on human intervention.
One approach to reduce the amount of human intervention required would be to create a framework rating plan with general terms and conditions applicable to all coverages and then file the rating plan with a number of coverages to obtain rating approval. Unfortunately, such an approach still fails to reduce the complexity and amount of human intervention required to construct and file versions. Further, the individual coverages of such an approach are not able to be combined in ways to create new or customized products based on individual needs.
Systems and methods are desired to facilitate insurance products based on components and the creation of such products. It is desirable for the insurance products to be based on reusable components that can be used to dynamically create insurance coverages. Also desired are the compositional rating and pricing and the automatic use of the of the component based insurance product.